Business Insider: Sony is playing a dangerous game to continue its dominance of Microsoft

http://www.businessinsider.com/sony-is-playing-a-dangerous-game-to-continue-its-dominance-of-microsoft-2016-10/?r=AU&IR=T

In a very real way, the future of the PlayStation is the future of Sony itself.

In July, Sony reported that a whopping 78% of the $546 million it earned in quarterly profits came from the segment that encompasses PlayStation, making it the company's golden goose.

Indeed, Sony's PlayStation 4 is the dominant player in the current video game console market, with 40 million units sold as of May 2016. Analyst estimates peg the Xbox One total sales at over 20 million (Microsoft stopped reporting Xbox sales numbers). In last place is Nintendo's Wii U, with 13 million sold as of June.

But nothing lasts forever, especially not in technology. That's something Sony is intimately familiar with — the PlayStation 2 is the best-selling console of all time, but with the PlayStation 3, Sony gave up much of its ground to the Xbox 360 and had to revamp the whole business just to catch up.

Now Microsoft is making big moves to unify Windows 10 and the Xbox console as part of an ambitious master plan to reinvent itself in the post-PC era. First up is a new Project Scorpio console coming next year. A unified Microsoft presents a huge threat to the all-important PlayStation business.

Sony PlayStation VR Darren Weaver/Business Insider

And so, Sony is betting big on unproven markets — in the form of the PlayStation Vue live TV streaming service and the PlayStation VR virtual reality headset, which comes out this week — to make sure that the PlayStation stays relevant, no matter which way the winds of change blow.

It's a risky game, but a necessary one. At stake is the future of Sony itself.

Sony's conundrum

Microsoft has been slowly but steadily building key Xbox features into Windows 10, and making games like "Gears of War 4" and "Forza Horizon 3" available on both the PC and the console with saved games syncing across both. It means that if you have a Windows 10 PC, you get access to many of the best Xbox games. No matter where you play your games, Microsoft wins.

It's a great idea. But Sony's big problem is that it just doesn't have Microsoft's reach.

While Sony has some services and features that you can use on a PC or Mac, like streaming classic games with PlayStation Now, Microsoft has Windows itself.

The channels available on the PlayStation Vue TV streaming service Sony

Sony might sell Windows PCs, but it doesn't make Windows. In this regard, Microsoft holds all the cards.

If Microsoft builds Xbox features into Windows 10, and starts to sell Xbox games right from the Windows Store app market, then all PC manufacturers, including Sony, have little choice but to go along with it.

And while Sony has tried to get into portable gaming, where Nintendo has found most of its recent success, the PlayStation Vita handheld console is widely recognized as a flop. Meanwhile, many younger and more casual players are doing more of their gaming on smartphones, anyway, which has led even Nintendo to iPhone development.

Without any existing platforms on which to build the future of PlayStation, Sony is forced to look elsewhere to keep the brand strong and relevant amid pressure from smartphones on the low end and the revitalized Microsoft on the high end.

That's where PlayStation VR and Vue come in.

Vue to a kill

Sony says it's been working on PlayStation VR, originally codenamed Project Morpheus, since at least 2010. Regardless of the timeline, Sony is in the market at the exact right time: Facebook, Google, and lots more tech companies all see virtual reality as the future, and are building their own headsets to get in the market.

What Sony has, that those other companies don't, are deep and decades-long relationships with video game developers. Anticipated games like "Batman: Arkham VR" and the forthcoming "Resident Evil 7" were built with the PlayStation VR in mind.

"Batman: Arkham VR" Sony/Warner Bros.

But if you want PlayStation VR, you need a PlayStation 4. It'll work with any PlayStation 4 console, past or present, but you need to own one.

It's a risky bet, to be sure: Virtual reality is still a very young, and very unproven market. Sony could be pouring millions into developing and marketing PlayStation VR, only to find consumer interest isn't there. The payoff, though, would be making the PlayStation VR, and by extension the PlayStation VR, a big early mover in what could be the next big thing in computing.

Similar, but different, is the PlayStation Vue TV streaming service, which lets you buy bundles of TV channels and watch them on your PlayStation 4, iOS device, Amazon Fire Stick, and most anything else except a Windows PC or a Mac. While it works across devices, the intent is clearly to make the PlayStation 4 your media hub.

The Scorpio affair

In all cases, Sony's strategy hinges on making sure you buy a PlayStation 4. For Sony, there's no Plan B. If the PlayStation falters, which it could one day do, so too does its greatest source of revenue.

That leaves Sony in the unenviable position of primarily selling hardware, as Google, Microsoft, and even Apple all shift their business more towards subscription-based businesses. Sony is doing that, too, with Vue and the premium PlayStation Plus membership. But Sony's 40 million PlayStation 4 owners, its primary subscriber base, are a blip next to, say, the billion-plus Apple iOS devices sold.

Ben Gilbert / Business Insider

It's not an impossible situation for Sony, by any means. It's not like the video game console market is going to implode overnight, and PlayStation is still the leading brand in that market. It's entirely possible for Sony to thrive, especially if the PlayStation VR really takes off and pushes more hardware and game sales.

But next year, Microsoft will launch the Project Scorpio next-generation Xbox console. Microsoft promises it's the "most powerful console ever." And rumors are swirling that it'll support Facebook's Oculus Rift headset out of the box, in addition to those other Windows 10 goodies.

That, combined with the continued popularity of the smartphone, has Sony facing pressures like never before. Virtual reality is a big, risky bet, but it's also the best chance Sony has to keep growing as its prospects of becoming a real platform company shrink.

Hahahaahahaa... Sony is doooomm doooooooooooooooommmm...

Keep dreaming.

And yet Microsoft is selling sooo bad it stop reporting numbers...yep.

If a holy trinity game like Gears of War won't push XBox hardware, then teraflops won't either. Microsoft should just ditch the XBox One altogether and make Scorpio a whole new platform. They need a fresh start and they need to invest money in making games.

@Shewgenja: To be fair they are investing some money in games, but nothing in their announced lineup looks to have major hit potential. And I think this is mainly because the games they get from 3rd parties are the games no other major publisher wants. Platinum has been trying to get Scalebound made for years and we see how far Remedy has fallen now that Microsoft has dropped them. They got a decent game from Insomniac , but only after Sony rejected it (regardless of the reason why). Invested money in timed exclusivity for the latest Tomb Raider game which did nothing but anger most of the game's fans. I really think they need to build pr buy some studios. Nothing beats in-house development IMO.

Pretty bold prediction on the rather perceived instant success of the Windows App store. And in particular, how massively successful the merger of the Xbox and PC will be.

Considering that the last time MS try to win over PC gamers with Games for Windows Live. It was nothing short of an utter faliure. PC gamers and developers (including Valve) have also expressed fears of what the Windows App store. May do to disrupt other distribution networks. And may become hesitant to support it. Along with the App store being a big reason why Valve developed Steam OS.

Yes the xbox brand is in the gutter consumers are scared of it.

Scorpio needs to be a big hit like iphone or galaxy .

The e3 show tanked everything it didn't look fresh kinect was already old this company doesn't know what there doing.

Look at apple they put out a big hitting product and people were like that looks good.

Microsoft puts out xb1 and gamers are like this looks like shit YOUR OWN base said it looked bad not regular joe consumers.

They don't know what there doing they just need to a rebirth or something and all the people need to be fired and get some fresh blood and know what there doing.

So if I am getting the gist of this correct, Sony is so good that MS is becoming good and will eventually be even more good than Sony, so Sony should be less good so MS has no motivation to be good and Sony can remain above MS. Letting the both be not good together

I think you're all skirting the point here by flipping this on Microsoft as if they have some type of non-capacity to trade equal footed blows with Sony, it happened before, it can happen again and with their market reach they could take things far beyond Sony's capacity to do anything, Sony has a magazine with 30 rounds, Microsoft has infinite ammunition. The problem now is that Sony as an entire company is ham-stringed to PlayStation, if PlayStation fails at any point or does not deliver enough going forward, the entire company will succumb to this failure and face dissolution, Sony will cease to exist, something Microsoft does not face.

Sony is making big bets all over the place as this journalist has said, however they are not in the financial position to handle large scale failure on any of these fronts. PSVR failing would be financially catastrophic, Pro failing would be financially catastrophic, their features they have spent countless amounts of dollars on developing failing would be financially catastrophic.

PlayStation is their paycheck, it's the only thing keeping their head above water, if this for any reason goes south, the entire company goes south. They would be forced to sell off their developers to stay above ground, who do you think would buy them? They're already taking money away from first party to develop PSVR and VR games as it's their big bet, which as of now the games have been met with total luke warm/negative reception, and the device while competent for its capacity as console VR, is grossly overpriced for a peripheral in this market.

Success doesn't last, runs always come to an end, luck does run out, If Scorpio takes off and the Pro does not, PSVR does not, VUE does not and so on and so forth, there is the very real possibility that Sony and the PlayStation brand as it is known could cease to exist.

lol yeah basically, sony did good so now microsoft has to do good.

Where does Sony Music or Sony Pictures fit in all of this?

Playstation as their "golden goose"?

WTF...

This is what i refer to look how you are when you are talking about MS and how made to order your arguments are. Equal footing my ass they had 1 year head start and as big as $300 price gap where the fu** you see the equal footing there.?

Trying to claim MS will keep the xbox brand for ever losing battle after battle is even worse they have unlimited ammo and have killed many of their product is the zune alive.?

How can that be MS has unlimited bullets to fight apple ipod,what happen.?

Yeah the pro will fail so hard..lol Is beating the shit out of the 4k xbox one S,go into amazon...

PS4 Pro at spot 36,PS4 old without games at spot 42,PS4 old uncharted 4 bundle spot 63,PS4 Uncharted slim bundle spot 65...

XBOS Gears bundle spot 76... Is not even fu**ing close the PS4 has 4 different bundles each on top of the xbox one S first entry,is a slaughter what sony has and that is US man.

https://www.amazon.com/best-sellers-video-games/zgbs/videogames#4

No one cares about 4k movies and no one care about Gears as those 2 bundles for uncharted show over gears.

XBOS madden bundle 98...lol

The xbox best effort was the xbox 360 and even with a 1 year head start and a price advantage over $200 dollars they ended 3rd in the console market,MS best effort = sony worst one that say allot.

By the way even if scorpio succeed in US and Pro fails,Japan and EU will stop Scorpio from winning i guess you were to blinded by your wet dreams of success to remember that the xbox outside US is DEAD...

You can't even have a rational conversation, you have no forward thinking abilities and you live in the delusional perception of what is, must and will always be.

Everything I said in that post is based upon fact and plausibility, why is it so hard to come to terms with that? You're sitting here comparing the Xbox One S to the PlayStation 4 Pro, they're not even directly competing devices and the Xbox One S is not Microsoft's future. You're talking about 'sales' for the Pro as if it's already gone off without a hitch without even the slightest thought that it's something hyped and unreleased, hype fades, especially when people know a greatly superior device is coming. You're not thinking about Sony dumping money into avenues that face the real danger of failure and massive losses, or the reality tied into that which could greatly harm them as a company and entertainment provider. You're not factoring in that they're going to have less money for other much more important things like games, this is already showing because they keep dumping money into new things, tons of mediocre VR games are coming this holiday, but what about PlayStation 4 games? Basically nothing, the possibility of The Last Guardian, it's misplaced priorities.

You need to be conscious of where things stand and where they're headed, you need to be aware of the dangerous games Sony is playing with their limited finances and the reality that one bad decision could cripple them. I'm not making this shit up, 78% of their entire revenue is from PlayStation, 78%... What have they been doing lately tormentos? Fucking up left and right, making bad decision after bad decision, becoming increasingly anti-consumer and pissing off their consumer base... The gravy train of self-perpetuating success is unraveling, auto-pilot has become disengaged, and the harshness is when they aren't just floating through a generation like they have been thus far for the PlayStation 4, they have to make decisions, and the decisions they have been making lately greatly show a great lack of landscape awareness or competence, they've been up in the clouds far too long and are having trouble finding the ground again. It's the same reason the PlayStation 3 was an initial disaster coming off of the PlayStation 2's success, they were completely out of touch with reality, and it's the same reason Microsoft screwed up with the Xbox One initially, they lost their way.

The problem is Microsoft has a long game here, Sony seems to want one, but they're half-assing every decision they're making and dumping money into dead ends. Microsoft has been making a lot of very market aware and competent decisions as of late, they're listening to everything gamers and developers are saying, they're building their brand and hardware going forward with complete consumer/developer transparency. The things they are doing now exemplify traditional Xbox values of old. If these ideologies and values would have been of importance at the time of the development and launch of the Xbox One, they would have crushed Sony, absolutely crushed them, especially coming off of the heels of the Xbox 360. The only thing that is holding the Xbox One back now is its hardware power and stigma, nothing else, when Scorpio releases that stigma will be dead and gone, and the hardware deficiency will not only fail to exist any longer, it will have transferred to Sony's consoles.

I don't want Sony to fail, but if they continue down this current path they will be left behind...

I agree that Valve fears the Windows Store, Microsoft is the most feared and brutal company in the gaming industry. But I think we need to be realistic. Valve developed Steam OS, it simply failed because of the lack of value and the terrible performance of games. I don't see that perception changing anytime soon.

This is the tech industry. Nothing ever stays the same. If Microsoft managed to disrupt Valve's Steam through UWP but keep closed stores like Origin, GOG etc. It's more to do with the fact that Valve was not competitive enough and was too slow to reaction or just that they made bad decisions like not developing SteamOS earlier. Just like how Microsoft is competing with Salesforce CRM and Marc benioff is panicking and using Antitrust as a way to avoid MS competing against his company through the LinkedIn merger.

Think you actually need to read what @dynamitecop is saying rather then going on your usual massive rants of shit. The whole point is IF PSVR and or PSPRO fail then Sony will be in trouble. The whole company rests on the the PS brand whilst MS doesn't rest of Xbox.

Yes the pre orders of both the PSVR and Pro look good, but pre orders no equal sales. They could start of brightly and the be a success or they could start of brightly then fall significantly.

For some one who doesn't own a PS4 you do for some reason have a lot of love for it

No

I think you should say that Sony. They haven't shown any direction for the PS Brand at all, aside of making money off it and trying to get more money by having consumers buy a PS every few years with the PS4 Pro.

You can be in denial all you want, but Microsoft has a much better direction to where they see gaming. Which is, where gamers are moving around on different devices. PC or console, headsets and even phones. Where everything is cross saved, buy etc. With Windows 10 as the centre of their vision.

And this is coming from someone who doesn't own a console

The Xbox One showed a console with add ons and TV focus (however good they where, I still use my kinect), doesnt sell as well. The PS4 showed a good console at a good price is the way to go.

Sony are taking a risk putting their eggs in that basket, especially when there are better solutions already out. Scorpio needs to be that top console at affordable cost and if VR takes off pair off with a VR provider already out there.

Going to be interesting going forward, the good thing about Sony's dominance is Microsoft not taking it and coming back fighting. Good for everyone really.

They don't need pushing. Xbox One S sold more than PS4 Slim in the UK.

@daniel_su123: Who the heck wrote this mess ? I mean is this a pro analyst / journalist ? I agree with very few of the points he is making , like 15%! Everything else is nonsense , i dont know from where to start

Microsoft is barking up the wrong tree

Get out of sony's way unless you want your head ripped off.

@daniel_su123:

Sure VR is unpredictable but I seriously doubt that the Scorpio will make much of an impact at this point in the gen. If anything, Microsoft is taking a bigger risk relying so much on the Scorpio. Ps4 Pro isn't even out yet and we don't know how well that will do either.

Right now, Sony just has to stay the course and they will be all gravy. Microsoft's best move so far was extending their games to Windows pc and is a perfect alternative if things go too South. For Sony though, there's no evidence that the ps4 sales will drop any time soon and Microsoft is putting their money on the hopes that people only cared about ps4 for its power. If they're wrong, then Microsoft just seriously fucked up.

I'd be worried if I had money on Sony or MS or Nintendo...since I don't, meh. I just buy whatever I think is best for me. And right now that is still Sony. Nintendo may change that though. We'll see.

Even if the Playstation brand fails one day (which it will as well as the Xbox and even Microsoft since nothing lasts forever). There is many things that Sony can do to keep their company alive even in a reduced form so I wouldn't bet they will disappear anytime soon. They could even turn themselves into a third party company like Sega did back in the day.

And MS is not in such a good position either. Their OS business has lost a lot of support thanks to Linux, Apple and cloud options that are continue to be dominated by companies like Google and Facebook. Their cellphone division was destroyed by Samsung and Apple. They stubbornly continue to rely on their Windows Store which has competition from much better options like Steam and their console soon will be with few to no exclusives and already faltering to Playstation. So yeah it is hardly the ideal time for MS either.

@killered3: Lot's of people were quick to ditch the 360 when there wasn't much game wise beyond better looking multiplats. It funny how people acting like sony doomed in when there just make full use of there success meanwhile xbox is just a sinking ship.

If, by great direction, you mean that the highest selling XBox One SKU (being the Gears of War Edition, and this being the game's launch day) is rated 76 in America's Amazon listing. Then, yeah! GREAT direction. Downward. The second place SKU just barely cracking the top 100 list.

Meanwhile, that PS4 Pro you just kicked sand on hasn't seen the third page (41-60) since it's announcement and has consistently been the top selling console in the gaming category. So, with all due respect, I think that come November the fog will be lifted even from your eyes sir.

All business is a risk. So basically yeah, there are risks involved in Sony's business. People here know jack and shit and jack's out of town.

The fact that makes me bullish on Sony is as this piece points out, they have established relationships with game devs. Facebook, not so much. So I'll bet on PSVR over the other.

Looking at the youth in the US, Hulu, Netflix, hbogo are pretty popular. Can PSVue make headway into this market of pay for what you want to watch/screw cable contracts? Time will tell.

None of this is a negative for Sony. Is it risk? Of course. But that's business.

@cainetao11: the youth hates TV and doesn't like tv but they love playstation. I could see Vue making some head ways...kids love the whole netflix model of paying for stuff they like which is what sony is giving them.

Its like oh I just want these 3 channels bam it could hurt basic cable im surprised comcast hasn't attacked sony more recently or tried to lock stuff off it.

@StrongBlackVine: You know you can't bring Rise of the TR here. Link to proof "most of the fans" were pissed off? Probably not, because it's you who were red hiney'd about it. Platinum have not been trying to get scalebound made for years. The actual information was, it's a game Kamiya has long wanted to make, not that platinum has been shopping it around to many publishers to no avail. Come on dude, your precious PS is winning. There's no reason to lie.

@ProtossRushX: Something tells me you and I have different definitions of youth.

I'm talking about 20 something's to 30. I go to school with the people asked many are tv fans, just not cable buyers. They will wait the necessary time in order to watch a favorite show on a Service rather than at the air time.

Eventually yes, cable will make an attempt to alter this.

Cows, poor, a break they can not catch. :P

This article fails to mention a lot for both companies...

First, Sony has Sony Music, Sony Pictures, and Sony Financial; all of which are big players in their respected market. Plus Sony makes consumer and professional cameras and camera parts. Each one of those business are worth millions of dollars. Even if Playstation is 80% of Sony's profit, even a decline in PlayStation Sony should be fine. They might not be profitable or make nearly as much as they were. They would just have to restructure again, if PlayStation took a turn for the worse for a long period of time.

Second, Microsoft isn't king of the software market anymore. Google and Apple have taken quite a bit from MS. Maybe not in the PC space, but in mobile they have destroyed MS. I can go an entire day without using Windows or any other MS service, thanks to my smartphone and Mac at work. That's what is dangerous to MS, people no longer depending on their ecosystem. Right now they have the business and desktop market, but that is shrinking and will never see growth again thanks to smartphones and tablets. MS is getting left behind. (Look at Nokia and Windows Mobile)

Both companies are dinosaurs in today's tech world and they have failed to adapt to changing markets. Google, Facebook, are the big players now. Apple seems to have adapted well though. Sony and MS should take notes from them.

The whole point of business is to be better than competitors.

Sony's bigger worry should be that the vast majority of their money comes from a shrinking pie (the sale of consoles). I'm not sure how much reach Sony has outside of that sphere.

Article kind of glances and skimps out on Nintendo's uncertain future. Mentions that handhelds are less secure due to smartphones and mobile gaming, but no comment on how the rumored hybrid console/handheld will fare.

Most people hate their cable company and have long wanted an alternative. The issue is these cable companies own some of the networks and can refuse to play ball or price the networks making an independant option unappealing since the customers don't want to lose the channels they watch and don't want to spend more. Cable companies play ball with each other with minimal competition because the others could do the same to them. Dealing with Sony could prove equally tricky since they actually produce and distribute many popular shows across many different networks putting them closer to being on equal footing in negotiations.

Well Kaz said PS is a PILLAR of SONY, so it will be the last thing held on to.

@dynamitecop: You're talking to a guy that is envious of your great gaming collection because he can't afford it! Also, you're sexy as hell in your sig :P You must have a hot wife, something @tormentos would never get because he's in bed with Sony

@Heil68: But technically, it was already spun off as a LLC

@Star67: What planet did you learn logic on? You named divisions' of Sony corp, claim they are big players in their respected markets yet you know 80% of Sony revenue comes from PS. So all those divisions brought in roughly 120 million but they are big players? So then those markets must be absolutely miniscule, then? LOL

Then you say MS isn't the king of software anymore yet their intake quarterly dwarfs that by Sony's "big player" divisions LOL ?

Good one.

Careful, the number in the OP is profit and profit =/= revenue. Additionally, it's possible to be a big player in an industry and not make a large profit. Tesla, for example, is a big player in the electric car business, yet loses money.

@asylumni: Completely understood. MSFT still turned a 3.1 billion profit last quarter as opposed to 546 million by SNE. The logic is easily seen. MS isn't required to be the king of software do be a bigger player in that then Sony is in its markets other than PS

The primary take from the article to me is that other companies are switching to sub models while Sony is doubling down on hardware, which potentially is a slippery slope, but I don't really think it's anything to worry about in the near future, like the next 5-7 years.

Other companies are moving to services because really high speed internet will become a global standard in the next 10-15 years, like 1Gb down over standard cellular wifi. With that type of speed more things can be cloud based and you don't necessarily need beefy hardware if most of the computation is done server side. Subscriptions will be where the money is.

Sony on the other hand put a bunch of money into VR.

Surprisingly PsVue is actually a good service having used it. It blows sling tv away.

I think what people need to wait for is what Sony has plans of doing in the future. Sony's big push will become really evident when the 2020 Olympics hits Tokyo. They are already actually working on a giant 8K Jumbotron screen for the main stadium. It's possible Sony and NHK (the company that wil broadcast the Olympics in 8K in Japan) could push 8K and put 4K in the past before it even gets a foothold.

As long as Sony makes displays and a services that use said displays (Sony movies, Sony music, games) I think they will be fine.

It's amazing just how well the Xbox brand and the associated games are doing for it. Who would have thought that it could potentially take down the PS juggernaut. With so many exclusives, so many games, the worlds best online service for console gaming. best price and value and upcoming most powerful console in the world, it makes more and more sense that Sony is bordering on bankruptcy. They can't just live on the PS brand alone. All the eggs in one basket will never work for them.

@cainetao11: Sony Music is one of the Big 4 in record labels that owns over 90% of record sales. Sony has 30% of it.

Sony Pictures has a 10% share of the major movie market. More than Paramount and Lionsgate and just below Universal. That's huge in the world of movies.

While they don't have a monopoly in any of those markets they are still big players in the markets...especially music. So your post is uniformed.

And MS is worried about the declining state of PC's. Why else are they trying so hard to get into mobile/tablets/and gaming?

@Star67: Ok, so then why are MS' earnings dwarfing these other Sony areas combined, you know, where they are big players and MS is so worried?

TL;DR

though, it is worth considering that Sony's push to rely to heavily on PlayStation puts them in a precarious position that if any future iteration of the console brand fails to keep it propped as such can have big consequences for the company as a whole, they need to rein in their other segments of business to pick up the slack to give Sony's game division some leeway if/when things should every slow on that end

lol, keep dreaming poor lems.

LOL, cows in denial